What’s the secret to deducting home equity loan interest? Find out now!

Podcast Announcer
00:00:00

In a world where crushing debt keeps you trapped, where living paycheck to paycheck has become your new normal, and where the dream of retirement seems impossibly out of reach, there's hope. Join financial evangelist Ralph Estep Jr. A man who's walked through the fire of financial failure and emerged stronger on the other side.

Welcome to Ask Ralph, the show where real world experience meets biblical truth to break the bondage of financial despair.

Get ready to take control of your money, break free from the financial stress and align your resources with God's purpose for your life. This is Ask Ralph with Ralph Estep Jr.

Ralph
00:00:39

Welcome to the show everyone. I'm so glad you chose to join us as we continue our journey in helping you master your finances from a Christian perspective. Now, let me go ahead and bring Craig in. There we go Craig. Hey, welcome to the show Craig. How are you today?

Craig
00:00:52

Good. How's it going?

Ralph
00:00:54

Everything is great. We've got a lot of good questions to cover today. We're going to talk about home equity interest. We're going to talk about how to save money at the grocery store. And we're also going to talk about some everyday expenses. So everybody buckle in, settle in, get ready for some great information.

And as we go through this, feel free to share your questions right in the comments, you can ask questions, you can comment about what we're talking about, but I'm really going to start with this. And a lot of people can empathize with what I'm saying. Are you feeling tired? Feel like your money slipping right through your fingers.

Do you ever wonder where it all goes at the end of the month? Well, today we're going to cover home equity interest. We're going to cover grocery savings. We're talking about everyday expenses. So let's get to our first question. Let me make sure, now last week, Craig, when I was doing this, it's the first time I've had a guest on the show.
I wasn't flipping the slides as quickly as I needed to. So we're going to try to do this right this time, but let's jump right into our first question. And this one comes from John and it says this, it says, "Hi Ralph, I've been wondering about the secret to deducting home equity loan interest. I've heard conflicting information and I'm not sure what to believe. Can you help?"

Well Craig, I don't know if you're fairly familiar with this one, but a few years ago, what they did was they put a cap on the amount of equity or the amount of interest that you can deduct. And he basically said that if you got a home equity loan that wasn't for improvements to your home or something like that, you couldn't deduct it.

So this has caused a lot of people to not understand this. So the key to this is if you are going to deduct home equity loan interest, it has to be for these categories. It's got to be used for a loan to buy the property, to build the property, or to substantially improve the home. Now, a lot of people will wonder, okay, Ralph, what does substantial improvements mean?

Well, let me break it down for you. In my personal view, and I've looked at some IRS code, I've looked at some other authorities on this, and they said, if it adds value, if it prolongs a life or adapts to new uses, so the IRS would really define these things as those things that enhance your home's value.

You know, not things like a vacation, not things like buying a new car or paying debt. So the interest is not deductible if you're not using it for those things. Now, the thing you need to understand is all of this is predicated on your ability to do this on as an itemized deduction. And you know, we talked about this a little bit on the show last week.
We've gotten to a point now where if you're a married filing joint couple, your standard deduction may be close to $30,000. So you have to have a pretty sizable first mortgage, second mortgage, or home equity loan and even to get to that. The big picture is if you're going to deduct this, it has to be secured by your main home.

It could also be a vacation home or a second home. Now here's where it gets more complicated than ever before. And this is what trips up a lot of people. When they change the tax law, they also put in this arbitrary number that the debt couldn't be more than $750,000. Now, this doesn't affect everybody, but if you've got mortgage A and let's say you've got a vacation home or a beach home or some kind of, you know, mountain home or something like that, you could easily, when you combine these properties, get over that $750.

So that really is the whole point here. So again, though, you got to decide if you have enough to itemize, that's the first hurdle. Second hurdle, were these things used to improve your home to make substantial improvements? You know, I'll talk about that in a minute. Like what that looks like, but you've got to really understand that before you jump into this.

What do you think, Craig?

Craig
00:04:34

Well, I always wonder about these sorts of things is how you really figure  out if it's the right thing to do, because sure, I may be able to deduct the interest, but I'm still having to pay back that loan. I'm still having to shell out that money, you know, whenever that loan comes due. So I get some tax benefit, which helps reduce the sting, but there's still a pretty big financial sting there, isn't there?

Ralph
00:05:00

Oh yeah, and that's what a lot of people don't realize, Craig. They come in to see me and they'll make a statement. I heard a train go by. We mentioned that we might hear the train there.

Craig
00:05:07

Yeah. Sorry about that.

Ralph
00:05:08

Craig, no, it's no big deal where Craig is on campus. We know it's going to be the 110 train maybe, right? Is that the time it's going to come through? But anyway, you make a very valid point because I have a lot of people that come in, Craig, and they say to me, Ralph, look, should I pay off my home or am I going to lose an interest deduction?

And I said, well, here's the thing you need to consider. And this is exactly what you were talking about Craig. You're paying a hundred percent of that interest dollar. Yes, you may be getting a tax benefit. Let's just use a simple example. Let's say you're in a 24 percent tax bracket and let's say you have a state income tax.

Like in Delaware, you're roughly looking at 8%. So even if we add 24 and 8, I can do math quick cause I got enough fingers and toes that takes me to 32. Well, even at 32%, that means you're still paying 68 percent of that interest. So it makes zero financial sense to pay that interest just for the sake of paying interest.

Now that said, one of the things I mentioned to my clients all the time is you also have to look at the opportunity cost. So if you're faced with this decision of, do I take out a home equity loan or do I use my own money? You've gotta really look at what you're making on that money. If you've got that money sitting or parked in a money market account and it's earning you 3%, and let's say the home equity loan is 8%, it's not really 8% with the tax deduction, but you know, take 30% of that 8%.

So it's like six and a half something. 6.6 if I'm doing my math right. It's still more than what you're paying or what you're losing in that investment. So that's really what the key is Craig. But a lot of people don't understand that. They think well, I've got to have this tax deduction because if I don't have this tax deduction, you know when I go to see Ralph to get my taxes done and when I do my taxes, I'm going to have a problem.

But that is a very astute point, Craig.

Craig
00:06:55

Well, and that makes me think about something that's kind of a tangent here, but there's a home equity loan and then there's a home equity line of credit. So let's say I'm worried about spending that money I've got in my savings account, but it makes financial sense to, you know, not get the 3 percent and not have to pay the 8 percent, that spread.

But then what happens if there's an emergency? Well, it seems like one strategy might be to go down and get a home equity line of credit that you don't start paying interest on until you actually tap that line of credit. That's right, isn't it?

Ralph
00:07:29

Yeah, absolutely. I did a show about that a couple of months ago.

The difference between a home equity line or excuse me, a home equity loan and home equity line of credit. I am a huge fan of home equity line of credits because it's kind of like that emergency fund that's sitting on the sidelines. And if you need to use it, use it. You don't have to take a draw from it.

Now you need to understand the nuances of the particular one you have. A lot of banks will take away that line if you don't use it in 24 months or 12 months or something like that. But Craig, no, that's a very good point because a lot of people don't realize that can be that secondary backup. You know, you may have your three to six months of savings in your emergency fund, but something could happen.

You know, you could have a devastation come through and insurance doesn't cover it for some reason. Or maybe you've got a bridge to you like, a lot of people were affected by the floods. People were affected by tornadoes. Well, it's great that the insurance company is going to come through and pay, but you might be looking up at the ceiling and you've got no, no roof.

Well, you've got to do something right away. So that's where you can go and tap that line of credit. Get that repair started, to get that repair done, and then when you get those insurance proceeds go ahead and pay that off. But that is a very good point.

Craig
00:08:39

Well, thanks. Thanks for clearing that up and I have one more question that may sound a little bit odd, but you were talking about making improvements that add value. So are those fixed improvements?

Like, let's say that my wife wants new drapes and you know, they're going to cost me a bunch of money because that kind of thing is expensive now. I mean, that might increase the value of the home, but that's not really an improvement, is it?

Ralph
00:09:07

Yeah. Now what they really talk about is something that prolongs the life of the home.
This would be something like you're going to put an expansion on, let's say you've got an area in your house, like, you know, people who put an expansion on their kitchen, maybe they want to put like a sunroom up or something like that, but it can also cover like things like you're replacing your HVC system because that can cost like the prices I'm seeing on the news is outrageous, right?

Let's say you gotta put a new roof on this. All the things that are fixing here. I think it will be a stretch to do curtains. It reminds me of the old it's curtains for you. I don't remember where that comes from, but it kind of, as soon as you started saying, I kind of remembered, I was like, I think that's a cartoon I had listened to when I was a kid.
But no. I think, Craig, that the main point is it has to be something that's going to prolong the life of the home and also add value to it. The big takeaway, what they're trying to get away from is people who are using the money for paying off other debts or because I used to have a lot of clients that would do that.

They'd go buy a car and rather than getting a car loan, they go get a home equity line of credit because they could pay it over a longer period of time. And at the same time, you know, they might be able to deduct the interest as compared to this. So that's really the big takeaway from that.

Craig
00:10:19

So like, just to make sure I'm clear. So drapes would probably be out, but if I replaced my windows.

Ralph
00:10:24

Yes, absolutely. Windows would be definitely, absolutely. And while we're talking about, remember last week, we talked about energy credits. So don't forget about that during that same process. Now, which leads me to sort of the follow up to this.

So make sure whatever you're doing, understand those rules, keep accurate records of the loan proceeds so that if you ever do get on it, because it's really a system where it's the honor system from the IRS. In other words, and this is one of the things I remember when this first came out, I said this is going to be a nightmare for the IRS to try to manage.
Because the lender is not going to say, Oh, okay. Craig bought drapes, but Ralph renovated his kitchen. They're not going to know that. So if you're the unlucky winner of the law audit lottery, then you better have records and say, okay, here's what I spent the money on. Here's what I did. And the interesting thing is money is fungible.

So you could have, you could use it for this, but then, you know, anyway, but this is something you want to reach out to a professional tax advisor and make sure you understand before you take that line of credit, because that could be very important. I just want to remind everybody while we're here.

I'm just going to pop this up on the screen. I do write a blog post every day. There'll be a blog post for today's episode. And you can get to that by going to askralphpodcast.com/blog. It's where I go a little more in depth and I give you some resources to talk about. Well Craig, let's move on to our second question.
How's that sound?

Craig
00:11:43

Sure.

Ralph
00:11:44

So the second question comes to us from Sarah and Sarah writes this. She said, "Hi Ralph. I'm struggling to save money on groceries without sacrificing nutrition or taste. Well, I'll tell you what, that's a good thing to do. You don't want to buy eggs right now. Can you share some practical and easy ways to cut costs without compromising on quality?"
Well, you know what? I think that's about the million dollar question isn't it Craig?

Craig
00:12:06

It is. It is, especially over the last couple of years.

Ralph
00:12:10

Yeah. We've seen such inflation at the grocery store and it's a challenge. You know, my wife kind of handles that in our family. And it's kind of funny cause every once in a while she'll drag me to the grocery store and I'll walk down the aisles and I'll start making comments.

She's like, when's the last time you're at the grocery store? I remember the last time we were there. I was looking at something I think it was a sleeve of Coca-Cola, you know, one of those I think it's like a 12 pack of Coca-Cola. And I remember I feel like they were three dollars before and now they're like ten dollars. And she's like have you been living under a rock?

I said, I guess, you know I'm just, i'm not used to doing that and now and we've even gotten you know, sort of lazy in that regard. We do the thing where you go to, I think we do Walmart right now, where you go and they pick your groceries for you to pull up and they drop them in, which is great, but I think that kind of desensitizes you to the costs.

Craig
00:13:02

It is, it is shocking, you know, if you only go to the grocery store once every couple of months, it's just insane.

Ralph
00:13:10

And it's funny though, because I hear people right now talking about, well you know, I guess my family is not going to eat eggs for a while. You know, and I get it as like, you know, and this comes down to a discussion about, in fact, I recorded a show today it'll play next week about this whole idea of needs and wants. You know, you really, this really comes down to needs and wants, you know, now you've got to make difficult decisions, which I'm going to talk about here.

Some things that you can do, but you've got to make difficult decisions about those needs and wants. When you go to the grocery store now, it's okay. Well, we need to have, I'll use a silly example, like up in here in Delaware, when we're going to have a snowstorm, everybody goes and buys milk and bread. And so once the snow storms over, everybody's making a French toast because they bought milk.

So I forgot the eggs too. Milk, bread and eggs. I'm like, well, do not people not, you know, because it's kind of funny, but people jump to that, but you got to really start looking at what are your needs versus your wants? So one of the big things that I've worked with and my wife tells me she does this and I think it's a great idea for the people who are tuned in today is plan your meals ahead of time. You know, really sit down, my wife and I sort of do this on Mondays when she's planning the grocery for the next weekend and we kind of plan out.

Okay, what are we going to do this day? What are we going to do this day and then kind of create a detailed grocery list based on your needs because if you just put it off and you say, well, I'm just going to show up at this store, I guarantee and stores love this. You're going down the aisles with that card and you are just grabbing stuff.
Like I remember when I was a little kid, my mom would take my sister and I to the grocery store. And we were like, this is game on time, right? Because we're trying to grab as much stuff as we're going to the eyes of my poor mom, single mom, trying to raise two kids. Listen, I'm a big kid. So I ate a lot, right?

So here, eventually my mom started saying, look, I'm not taking you kids to the grocery store anymore. You give me a list of what you want. You want some wants, put them on the list. And of course I'd make my list where I need two bottles of Pepsi, some honey buns, stuff that wasn't healthy for me.

Now I'm kind of paying the price for that, but I think it really comes down to doing that detailed grocery list. I think it's so important. What do you think, Craig?

Craig
00:15:12

No, spontaneity in the grocery store is a bad thing, and they really do, the merchandising really does play off of that. I know there's an old adage that I think is true is that you should never go to the grocery store when you're hungry, because everything sounds good.

Ralph
00:15:29

Oh, absolutely, absolutely. Yeah.

Craig
00:15:31

There's no doubt about that. The other thing, leftovers. You know, the leftovers kind of have this bad rep, but when you're planning your meals, you know, think about can we eat this for two or three nights in a row or will it keep, so we can, you know, eat it Monday and then eat it again on Wednesday or Thursday.

But that can be a huge savings, especially for a smaller family. It is just me and Tracy. Well, it's hard to make a meal for two people. That's just going to be that one meal. So if Tracy's going to cook, we've got to think about how many times are we willing to eat this?

Ralph
00:16:10

Oh, absolutely. Like I know today my wife is making a big pot of chili and we've already decided, Hey, you know, Ralph, this is your dinner tonight and it's going to be your dinner Thursday. Thursday night is my late night that I meet with clients. She's like, just be prepared. There's going to be a bowl of chili heading over to the office with you. And the thing, I don't know if you've gone through this with your wife, Craig, or not, but like, as we get older, the kids have left the nest, my wife and I just don't have the appetites we used to have.

So it seems to me like there's more, it's harder to find, like the to put those meals together. But I think that's all part of creating that detailed grocery list because like you said, that spontaneity. The other thing I'm going to recommend people do is shop the sales. My mom's second husband was great with this.

Every Sunday he'd get the newspaper and I don't know how effective this was, but he'd have all the ads for the different local grocery stores and he'd kind of plan out his strategy. I'm going to go to this one to get this and this, and I'm going to go to this. Now, I think you can get a little crazy with that.

And then you got to factor in your time and all this kind of stuff. But you can look at that. The grocery stores put out what they call lost leaders. You know, they're going to put stuff out there that, Hey, you want to do this? You just got to take a look and make sure you're not falling victim to the spontaneity when you hit the store.

Craig
00:17:19

Right, right. Absolutely. And coupons are still a thing.

Ralph
00:17:23

Oh, absolutely.

Craig
00:17:24

You know, I know everything's digital now, but you can still clip coupons and save quite a bit of money. You know, especially if you're not, this is another big message, is don't be overly picky about brands. You know, is there that much difference between, you know, the Snyder's pretzels and the Rold Gold pretzels? You know, the one you get cheaper.

Ralph
00:17:46

As the old adage that says them's fighting words.

I know Mark from Practical Prepping, he likes his Corned Beef Hash. I think it is. And he'll tell you the only kind he eats is Hormel as I remember. But you're right. No, but Craig, you make a bigger point though, and that is true, are we as sensitive to the brand?
And if you are, then we put that in that category of wants, and then you decide, well, maybe this week we're not going to do this because that the one we really like is so expensive, which leads me to the next thing I recommend. And that is consider buying in bulk. Now you can get crazy with this. Like, I don't know if you've got them where you're at in Louisiana, but we've got the Costco and the Sam's club.

Now you go in there. It looks like you're buying for giants, right? Cause the last time we went in there, like I think there was, and I'm not overestimating, I think it was a 50 pound bag of rice. Now you and your wife, Tracy, like my wife and I, Jennifer, like we're not eating 50 pounds of rice, unless you know, for the next six months or six years, maybe even at that point.

But so buying in bulk makes sense, but you got to look at what you're buying and are you going to use it? Because my personal opinion on those stores is they entice you with that bulk stuff. Like I know one of the things that the Costco like here locally I love croissants, butter croissants and you go and these are fantastic at the local Costco. But the problem is there's about 30 of them in the box. As a type 2 diabetic I'm like, I should not be eating butter croissants to begin with, much less 30 of them. So I don't know if you've got the same situation down where you're at.

Craig
00:19:17

We have I think the next time we'll have to buy Ritz Crackers is probably going to be 2042 Because I bought some from Sam's club, right? And so yeah, yeah, but you know something like that will last a really long time versus a muffin or a croissant.

And so you can plan these things out. I have a question that really Costco and Sam's are both really good at. What do you think about store brands versus the name brands?

Ralph
00:19:45

It's funny you bring that up, Craig, because when I was a kid, like I said, my mother raised us, you know, as a single mom and she used to buy that.

I remember we used to shop at the Pathmark. I don't even know if Pathmark is still around, but they had this "no frills" brand. And I remember because it was no frills. I mean, it was like a white label with black lettering. Well, the truth is I've tried some of those store brands and to be honest with you, when you flip them over and you look at the ingredients, it's the same stuff.

Now I'm going to tell you one personal thing. I don't like store brand ketchup. I like the Heinz ketchup, but anyway, but you're right, Craig. I think you bring up a good point in there. There are so many opportunities for where you can buy the store brand and it might save you 10, 15, Hey, maybe 20 percent of the cost.

I think that's a very valid point.

Craig
00:20:27

Especially with over the counter medications where, you know, I have an allergy spray that the name brand is, I think $15, $18 per little bottle. For like 25, I can buy five or six of the same things in a generic brand. And so, you know, if you let go of those name brands, I mean, sometimes, you know, all right, you want to spend an extra 50 cents on ketchup that lasts you two months, you know, go nuts.

So I think you can go overboard with all of this too, if you're not careful. But there's still value in pleasure.

Ralph
00:21:00

Oh, absolutely. And you can get into what I say to a lot of my clients, you can go into paralysis through analysis and it's really easy to get there. So there's some things, I think you can compare prices between different stores, compare brands, you know, smart, you know, do savvy shopping.

Like for example, like I'm one, I like to eat strawberries every day with my breakfast. And my wife says to me about two months ago, she goes, do you realize what we're paying for strawberries in November? I said, didn't even consider it. So she goes, look, you're getting frozen strawberries from now or can produce.

Now, is it as healthy for you? One could argue yes or no. I actually think some of the frozen stuff's even better. But it's, you got to shop with the season too, right? You know, I think that's a big part of, and one big thing, and you mentioned this a little bit, Craig, in that plan to use your leftovers, that we waste so much food.

Oh, we truly do. And that, it all goes into all the things we talked about is that creating that list, planning out your meals and planning for those leftovers. Craig, I think that's huge, but you're right. Because like you hear, you see it on the sitcoms, you see it on the mainstream TV, Oh, who wants leftovers?

Oh, we're eating that again. But like I got to be honest with you. Sometimes I think, especially when my wife makes a soup or a stew, I think that stuff's better a day or two later. Now, when it's starting to get like a film on it, or it's starting to grow hair, that's usually not a good sign. But if you store it correctly and you're diligent about it, you can certainly save yourself some money in my view.

Craig
00:22:24

Yeah, absolutely. You brought up something that's, that I think really important too, kind of, is you pay for convenience. So I don't have kids. But Lunchables. You know, what you pay for a few crackers, a couple squares of cheese and a little bit of, you know, third rate lunch meat is just insane. A little bit of prep time over the weekend.

Ralph
00:22:50

And I don't think people realize it, but it's that convenience and it's funny you said that. So one of my top things I was going to say is avoid pre-prepared convenience food because yet you're paying for that. You look at the portion of that, those Lunchables are a great example. I remember when my kids were smaller.

Oh, can we get the Lunchables because it usually had a toy in it or it had some kind of cool picture on it. But when you look at what you're actually getting, I remember they used to sell these Lunchables and they had little, they look like, like dollar size coin of turkey and there'd be three or four pieces of those and three or four pieces of cheese and four Ritz crackers.

And it was like, I don't remember, three or four bucks where if you bought, like you said, Craig, you bought those things individually, it's a lot less
costly.

Craig
00:23:30

Even if you have to buy some toys to throw into the lunch bag, you know, you're still ahead.

Ralph
00:23:34

Oh, absolutely. And when we're seeing inflation, I'm hoping inflation is going to come down, but we haven't seen a huge decrease yet.

I think it's going to take time for things to get back. But I think all of these things, if you really focus on these things, you can, in fact, find ways to save money.

Craig
00:23:50

Well, and even if inflation does get under control, If you build these habits about smart shopping and all these things, you know, avoiding convenience, leftovers, you're still going to be better off when prices come down.

Ralph
00:24:04

Oh, absolutely. It's all about building that habit. It's all about building. And I'm going to share a Bible verse here because I think this is really appropriate. And this is from Philippians chapter 4, verse 12. And it says, and this kind of gets back to this discussion we were having about, you know, wants versus needs.

And this is what it says. It says, "I know what it is to be in need, and I know what it is to have plenty. I've learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want." And Craig, I really feel like that really addresses kind of what we're talking about and being a Christian finance show.

I didn't want to forget about that, but that was, that's part of it too, is we have to have, it's funny. Somebody said to me the other day, you'll get a kick out of this one because this is a whole Christian discussion. People say, well, you know, you need to have faith. You need to have faith that the Lord will provide.

And if somebody says something, I thought it was brilliant. They said, you know, it talks about in the Bible that even God watches out for the birds. And that's true, but somebody said, but Ralph, the birds have to leave the nest. The birds have to do some action. So what we're talking about, what we're sharing today are actions that you can take.

If you want to see a decrease in your cost, you want to make money, like Craig just said, start building up that endurance by doing these little things because little things add up. They really do.

Craig
00:25:22

Well, and you know you talk a lot about being good stewards of the resources you're given as part of the Christian faith, and that extends to what you spend your money on.

So even if you have plenty of money to go buy groceries, if you're not really getting value out of what you're spending the money on, that's not being a good steward.

Ralph
00:25:42

Well, that's absolutely right. And it's interesting. Like I said, I was recording a show today and it came to me something while I was recording.

It's like, if you think about it like this. It's all a question of if you're taking money from this bucket, you're taking it from this bucket. So if you're at the grocery store and let's say you, you don't have to worry about where your next meal's coming from. You're in a position where you're, you've got enough money coming in that you don't worry about it, but every extra dollar you're spending is less money you're going to have for retirement.

It's less money you're going to put in investments. It's less money that you're going to be able to maybe give in charitable contributions. So you're right, Craig. So even if you're listening to this right now, and you're watching this, you're saying, don't worry about that. My grocery bills aren't that high, but yes, but they're still costing you something.

And if you are a better steward of your resources, if you decide to put it here or put it there. So that is a very brilliant point, Craig. Well, let's get to our third question of today. And this one is coming to us from David and David writes this. He says, Hi Ralph, I feel like certain everyday expenses, we're on a theme here, Craig. I just realized this. Let me start over again. So "Hi Ralph, I feel like certain everyday expenses are draining my bank account like a leaky faucet. I think that's a great metaphor. Can you help me identify these expenses and give some tips on how to address them?" Craig, I'll tell you what, man, this is one I hear all the time right now.

It's a time of year when I'm meeting with a lot of people and people come in and they're like, Ralph, I know you have this podcast show. What are your ideas for trying to save money? So David, first thing, thanks for reaching out. You feel like money slipping away. I get it. It's frustrating.

Well, let's talk about some of the things you can do. One of the things I think about Craig, and this is a big one. Craig and I belong to some podcasting groups. And we were talking about this one the other day and that's subscriptions and memberships. I don't know how many of these I have, and it's funny.

One of the things, I just had one the other day, I think it's called JibJab. It's like this app where you can create these cartoons. I didn't even realize it. I had this thing set up to auto renew once a year. Well, it's like I set it and forget it. And then it ought to realize, I was like, I haven't used this thing in two years.

Craig
00:27:43

I think that was a thing like five years ago.

Ralph
00:27:46

Absolutely. So that'll just tell you how long I've been paying it, but think about how many of these subscriptions and these memberships that people have. One of the funniest things I was working with some, a couple of months ago, husband and wife, and I was doing some financial counseling.

And one of the things I was encouraged them to do is, write down where every single dollar goes and this particular couple and their dynamic was he had his checking account, she had hers, and they kind of had this one in the middle where they kind of shared expenses. When we looked at it, they both were paying for the same subscriptions.

And I said, this is so common, but it's that old adage. It's like I say on my show all the time, what gets measured gets done. So look at your bank statements, look at your credit card statements, look at your PayPal account and see what you're paying for. And then again, do that analysis. Is this something that I need, or is this something that I want?
Like you said, you don't have to live, you know, in a cave and not have memberships. Well, you know, we all pay for these things and that's okay to do, but I see so many people, Craig, I don't know about you, but like they have these memberships and they just kind of set it and forget it. And it just stays on this owner.

And listen, the companies love it because they're getting that they're getting that recurring income. And if you don't call and complain, or if you don't cancel it, they're not going to bother you.

Craig
00:29:02

I'm feeling very attacked right now when I think about all the subscriptions I have. So one little thing that I'm trying that's helping is going into my Google Calendar, and this would work with whatever calendar you use, and setting a little thing that says cancel or re evaluate this subscription a week or two before it renews. The ones that get me are the annuals.

Ralph
00:29:25

Oh, absolutely.

Craig
00:29:26

You know, the monthly ones I kind of see every month. And so if I'm not using it, I'm out, you know, $7 or whatever. But you know, I got one, it was $200 that I'd kind of forgotten about, and I'm not sure I need, but you know, they've got their money and I'm not getting that back. So it's another year of it.

Ralph
00:29:45

Oh, absolutely. I just had this happen to me the other day. I signed up for a test of that beautiful AI for doing AI based slides. And it said very clearly, put your credit card, you get seven days. Well, guess what? I got busy. So guess what I've got for a whole year now. I got beautiful AI. I can't blame them.
They're selling a product. It's valuable. But like you said, Craig, what I should have done is six days into that, put on my calendar. Hey, Ralph, are you using beautiful? And I'll get value from it. Don't misunderstand me. But you're right, Craig, that's a brilliant thing to do.

Craig
00:30:14

Well, fortunately that's a really good tool if you have to make slides.
So at least that one's pretty good.

Ralph
00:30:21

Absolutely. But, you're right. And I think those annual ones are complicated. So one of the things that I recommend clients do, especially if you're on the Apple phone, if you've got Apple subscriptions, you can go right to your Apple account and look at those. And let's say it's one of those ones that renews every year.

Well, you can check a box. It says, don't automatically renew this. You're still going to have access to it for the next 11, like me, 11 months and 30 or 29 days, because I wasn't paying attention. But at least you set into motion that momentum of, I know this, I'm not going to renew this because I think that if we looked at it in the economy, I bet you there's people, I don't know, I don't have a statistic for this, but I bet you there's huge numbers of people who are paying for stuff that they don't use.

Craig
00:31:02

Oh, It wouldn't surprise me if it's close to the majority of people.

Ralph
00:31:07

I think you're right or something.

Craig
00:31:08

I mean that that's the whole basis for the gym industry, right? People pay come a couple of times and then never show back up.

Ralph
00:31:15

Yeah, I bet you know at the beginning of the year It's like everybody's oh we got to go join Planet Fitness.

We got to join us I bet you if you walked into the gym now, what are we February the 18th? The place is probably vacant. I don't know. Maybe I'm being a little bit pessimistic. Maybe there's still a little bit going on.

Craig
00:31:29

Yeah. A few people, but one of the things that I really struggle with here is thinking, oh, it's only 10 bucks.

And so it's kind of, you know, if it's something that's a couple hundred dollars, yeah, that gets my attention, but especially with inflation, you know, what's $10, but $10 here, $10 there. You know, eventually you're talking about real money. But they price these subscriptions at a level to where you won't worry about it. And so try not to fall into that trap.

Ralph
00:32:01

Oh, that's marketing genius if you think about it. They set it at the level that's just low enough to where you don't, ah, you know, it's yeah, okay, I might use it, but you're absolutely right. Another big one that catches people in this area is dining out. And listen, I'm a victim of this.

My wife and I, as the kids have gone and done their own thing, we eat out a lot. It's kind of, for me, it's not so much the food component, it's the socialization component. It's the getting out and doing stuff, but it does cost you more. Like I said to my wife, I'm an analyzer, right? So I track every single expense.

And I said to her, I guess a couple of weeks ago, I was looking at our end of the year stuff. And I said, do you realize we spent X on eating out? I won't tell you the number cause it's personally embarrassing, Craig. And she goes, yeah, I figured that Ralph, cause you like to eat out all the time.

But then I said to her, but think about this. I even know it by restaurant. I can tell you how much was spent at this restaurant and spent at this restaurant. And then, you know, I see a big proliferation of this with this DoorDash and Grubhub. I had a client in a couple of weeks ago, Craig, husband and wife and they've got like teenage kids and they were complaining about how their kids are always ordering DoorDash and I said who's paying the bill?

You know, my youngest son, he's a barber here locally and he'll say to me sometimes, you know on Sundays I'm just so tired. I just ordered DoorDash and they bring the Dunkin Donuts to me. And i'm like, wow do you like, you're trying to and i'm not picking on him. He's new. He's starting his career.

He's 23 years old. So he doesn't have a lot of extra money. But that's a huge area. What do you think, Craig? I mean, do you see that as being an issue too?

Craig
00:33:32

Oh yeah, yeah, absolutely. Especially again, going back to inflation as prices have gone up and up and up, dining out has been hit as hard as anything, but I think it's worth a little bit of a caution though.

If you get a lot of pleasure out of going out with your wife or with your family, sure, it's a good question to ask, should we cut back on this? But it's also okay to say, no, we shouldn't, because this is really important time for us. It's not preventing us from saving enough for retirement or paying our bills or whatever else.

So if you've got the money, and you get the benefit out of it, I think it's okay. I struggle with this a lot because I'm naturally cheap, but it's like it's really okay.
Spend some money

Ralph
00:34:22

And I think it's that needs versus wants thing. And see, so there you have a need to connect with your wife. You have a need like one of the things that we do is every Sunday, my wife and I and my youngest son who still lives in town here, we go and see my wife's mother.

She has Dementia and she's in a nursing home. Well, one of the things we do is we go visit with her and then we have dinner together. Well, that's a family dinner. So you're right, Craig, there's value in that besides the eating out part. You're right. And with any of these decisions, we've got to look at there's the immediate, you know, that gratification part, but there's also the other side of that.

And you got to build that thing, which leads me to the next thing. And this is one thing I think all of us can work on. And that's impulse purchases. I don't know how many times that I've counseled people. I've done it myself, but ask yourself this question. I said this morning when I was recording.

Every single purchase, is this a need or a want? And here's my advice for everybody watching or listening. If it's a want, wait 24 hours.

Craig
00:35:20

Yeah.

Ralph
00:35:22

Now some people, 24 hours isn't enough. You may have to wait 36 or 48 or two weeks. I don't, but think about it. Because it's so easy to make that impulse purchase like you talked about in the grocery store.

The grocery store is the definition of impulse. You know when you're checking out the grocery as you're getting into the checkout line, they got just you know, all this stuff that's attacking you as you're standing there waiting for the person in front of you to check out. There's gum, and there's magazines and there's candy and this and that.
Not very good things for you either, by the way, but what do you think about that, Craig? I mean, that impulsive buying is big.

Craig
00:35:54

No, I can testify to that 24 hour rule. So Tracy and I are trying that. So we've, she's doing 24 cause she's a little bit better at it than I am. I'm doing 48. So something, you know, unless it's a, you know, I need vitamins or, you know, something that I really need.

Ralph
00:36:12

But that's more than needs versus want. I'm really saying on the one side of things.

Craig
00:36:15

Exactly. So it goes in the shopping cart and sits there for at least two days and I was shocked. We just started this right around the first of the year, and I looked at our credit card bills and I went down to Tracy and I said are you buying less and she said yeah, we were going to do that 24 hour thing. I mean our credit card bills are pretty high. So it's got to be a big difference for me to notice it. And it's like wow.

I was simultaneously horrified and proud. I was proud that we've gotten this under control. I was horrified by how much we were buying that was unnecessary before. But that really does work, that little bit of cooling off period can make a huge difference because a lot of things look good in the moment.

Like there was a frying pan. I put in the shopping cart.

Ralph
00:37:06

Let's hear about the frying pan, Craig. Come on.

Craig
00:37:08

Yeah, so it's what, you know, New York Times has it the best, you know, nonstick pan. It was $30, which, you know, doesn't mean anything to my life, but it's sitting in the shopping cart and I'd say it's probably 50/50 whether or not we're going to get a new frying pan because we certainly don't need one.

But, you know, if after two or three days, hey, I really like a nice frying pan, I'm going to buy this, this one. Okay. But then you've moved, this is your, to your point. You've moved out of that impulse mode. You've had some time to kind of reflect on it, think about it, consider it. If you still want to do it, do it, do it and don't feel guilty about it.

Ralph
00:37:45

And see, I think that that's the huge danger of Amazon and I'm not going to sit here and pick at Amazon, but listen, I know here where I'm at, we have a huge, I think Amazon distribution centers are everywhere. I think they've honestly taken over the world as we weren't looking.

I mean, I can literally sit at my desk this morning before 9am if I want something from Amazon, it'll be at my front desk by 3 or 4 PM this afternoon. It's just so easy. And you know, even when before Amazon, we'd have to get in the car and go to the store. Well, that cut down on a lot of that impulse because you had to get out and do it.

You had to go into the store. You had to find the checkout person, find what you want. Now it's just a matter of point and click. I mean, you can say things to these online services. Hey, you know, I don't want to say it now because it'll set it off behind me, but they'll actually do the shopping for you.

And I think you're right. I think one of the tips you can take away and Craig and I are both endorsing this is put the stuff in your cart and then let it simmer. Like it's a beef stew and you're just waiting for that thing to cook down and really get good because you might go back to that. It's funny cause Craig, I haven't really thought about it. I started doing this myself the other day and I went and logged into Amazon for something I had to get a need that I needed. I needed to get some vitamins, actually, is what I was ordering. And I said, wow, I got all these things in my cart. Like what was I thinking at the time?
And, but listen, I had a client I counseled, maybe it was about a year ago. And we looked at it. They were spending between $800 and $1,000 a month between their family. There's a family, a husband and wife, two kids. $1,000 a month on Amazon purchases. Now, some of that was grocery. Some of that was bulk items.

Craig
00:39:18

I wish mine was that low.

Ralph
00:39:20

But you understand what I'm saying now?

Craig
00:39:21

No, it's a lot of money.

Ralph
00:39:23

I'm not poo pooing on Amazon because they offer a great product. It's very convenient. And listen, if you're buying stuff that you need, a lot of times the prices there are better than the grocery store. Like, you know, it doesn't make any sense to spend money at the grocery store if you can.

But just, I think that cooling off period is really a good thing to do.

Craig
00:39:43

Ralph. I've got one that most people wouldn't have thought about before that's saving me a bunch of money. So there's a thing called mobile virtual network operators, MVNOs. Have you heard of those?

Ralph
00:39:56

No, I've never heard of that. What is that?

Craig
00:39:58

These are mobile phone companies that piggyback off of the big networks.

Ralph
00:40:05

Oh, I know what you're talking about.

Craig
00:40:06

I can see that. It seems like Mint Mobile and Visible.

Ralph
00:40:09

Yes, yes, yes, yes. I see those commercials. Absolutely.

Craig
00:40:11

Well, so we, Verizon is what we get, you know, that's how we can get a signal at my place.
So I was spending a ton of money on Verizon. And I moved Tracy and her mother over to an MVNO a couple of years ago and saved, we went from paying probably $40, $50 a line to paying about $15 a line. Neither one of them are big data users, you know, so just got a nice cheap plan. And then I finally moved myself over this month.
Did you really? Take a guess how much I'm going to save just on my phone.

Ralph
00:40:51

I bet you're going to save $100 a month.

Craig
00:40:53

You're not far off. I'm going to save over $60 a month.

Ralph
00:40:56

Yeah. That's huge.

Craig
00:40:57

That's for an unlimited plan that's using the exact same network as I was using. Plus this, I use U.S. mobile now. I can actually switch among the big three networks.

Ralph
00:41:10

Oh, wow. So you can go somewhere.

Craig
00:41:12

Yeah. if I'm going somewhere where T-Mobile is going to be best, you know, like maybe I come up to visit you for the football game and Verizon is not so good, but AT&T is great, I get online, switch over. And I'm on AT&T.

Ralph
00:41:27

Wow.

Craig
00:41:27

And so that's huge. You know, tons of data.

Ralph
00:41:31

And you don't see any degraded service? They're not throttling it or anything like that?

Craig
00:41:35

No. Now some of them do.

Ralph
00:41:37

So you gotta, you have to do your research. You gotta read the fine print, understand what you're doing.

Craig
00:41:40

Right.

Ralph
00:41:41

But Craig, going along line, not to interrupt you, but like, how many times are you on Wi-Fi anyway?

Craig
00:41:46

Yeah, $90 percent of the time.

Ralph
00:41:47

And that's the thing people don't understand. People think they have this huge data usage. Look at your use case. Most of the time I'm sitting in my office, I got Wi-Fi. I'm sitting at home, I have Wi-Fi. But go ahead, I don't mean to interrupt you, but I think that's a really valid point.

Craig
00:41:59

No. You know, unless you do a lot of traveling where you need to be on your own, you know, your own data connection for security purposes or that kind of thing, there's almost always wireless. You know, unless you're driving down the highway or something like that, you can connect to WI Fi, but. But that's a huge.

I mean, I'm going to save $800 a year, right? What it's going to come down to $800 a year.

Ralph
00:42:21

And see, then with that saving, you can decide, maybe you take your wife out to dinner more because you're saving. And this is where it is one of the discussions I was going to say is that as you reduce the value or to reduce the cost of those needs, it opens up that door to feed more of those wants.

And that's one of the things that you know from a psychological perspective we can still have those things we want. We can have our little splurges and if we can save money over here by and that's a brilliant one because you look at how, I mean a cell phone is like it's like connected to everybody's body at this point. I just did, I did a show that actually released today about how to protect yourself with cell phone security. Like a lot of people don't think about it. It's a huge gaping hole with most people security plan. But we all have them and if everybody's paying a hundred dollars, because we have this false belief that you got to have the best. You got to have the highest data plan.

You got to have this screaming internet. But look at your use case. Now, if you're somebody that's out like a traveling sales person, you don't have Wi-Fi, could be a different use case there, but Craig, that's huge.

Craig
00:43:24

Well, and you can always switch back. Yeah, I went with it. I was really confident about this. So I went with an annual plan.

Ralph
00:43:31

Oh, did you really?

Craig
00:43:32

But yeah, it just saved some money and I already knew that this was going to work well at our house. But you know, you can try one of these MVNOs for a month or two and if it doesn't work out, you know, Verizon or AT&T will take your money again.

They're not going to, you know, it's not some, you know, partner that you broke up that doesn't want you back. They'll take your money again.

Ralph
00:43:52

Yeah. You don't have to do a post nuptial prenuptial agreement. You're not going through a cell phone divorce, right, Craig?

Craig
00:43:58

That's right. But there's one big caveat. If you've gotten your phone through your carrier, which I think is a bad idea.

Ralph
00:44:07

Right.

Craig
00:44:07

You need to double check the fine print and see if that's going to cost you more than you would save. And you may need to wait until your phone is paid off or your obligation is up.

Ralph
00:44:16

And that's one of the reasons I do mine through Apple directly.

Craig
00:44:19

Yeah.

Ralph
00:44:20

And by, Yeah, I do it through Apple. And the benefit to that is you got, I think, I think I have a one year plan with Apple.

It pays over a certain amount of 12 months and I can renew every year. But you can pick your carrier. They could care less. You know, but you're right.

And that's where you had to Be careful of that, because I know I use Verizon as an example, and I know Verizon always sends me, hey, you're entitled to an upgrade. And I've tried to wean my wife off of that, my two children off of that, because I said, get it directly through app.

That way, if you want to change carriers, you can do that. But you're right, people don't realize it's the same antennas.

It's not like they have, you know, 12 different antennas in each area of where they're serving.

Craig
00:44:57

They do have different prioritization levels, but that often doesn't matter at all. 1. One kind of bigger point is Verizon is offering you those free phones because it's good for Verizon, not because it's good for you.

So just always keep that in mind. If. If somebody's really offering you this great deal, there's something underneath there that you can.

Ralph
00:45:22

Well, you get what you pay for. I mean, that's just the truth, right? If. If somebody.

I always think it's funny because he was like, well, I just got a free phone at the Verizon store. You didn't get a free anything. No, you got a deferred free phone. But Verizon's making money on that.

Craig
00:45:37

That's right. That's right. I mean, that's why they do it. It's always. That's. As long as they've had mobile phones, it's been the same thing.

Ralph
00:45:43

Absolutely. Well, let me add a couple more things. One of the other things, and this was big during the 70s. I grew up in.

I was born in the early 70s, but I don't hear people talking as much about this. And that's turned the light off when you leave the room.

You know, energy consumption is a big deal, you know, and I think that we've kind of lost track of that.

We lost sight of that because I think it's partially because we have all these gadgets around us all the the time, and they're just always running, and there's convenience in that.

But, you know, one of the things that I mentioned on my show a lot is like, when I built my new office here on the farm, I did all of these puck LED lights. Well, they take almost no energy, and they're super bright, a little bit too bright some days.

Craig
00:46:18

But those things are awesome.

Ralph
00:46:19

They really are. And you can adjust the color, you can adjust all these type of things to them, and it's little things like that. Yeah, maybe it's $10 a month.

Maybe it's 20. Like right now in Delaware, there's this big battle going on because our, our local electric provider has increased. Everybody. Great.

And I said, well, this may be an opportunity for people to say, turn the light off. Turn off the extra stuff. And, you know, you also mentioned brand name products. I think that's another big one here.

We talked about that on the grocery stop. But, yeah, look at the store brands. Test the store brands. Hey, if you don't like it, you don't like it. Look at the generic products.

I just think that's a very simple thing that you can do.

Craig
00:46:55

Well. And a lot of times, especially the grocery stores, the name brand and the store brand are coming down the same production line and they just split and go into different boxes. And so it's literally not, not always, but a lot of times it's literally the exact same product just in a.

Ralph
00:47:13

Different package, Just a private label on it. That's all it is. Yeah, yeah, yeah. And people don't realize that.

And, you know, but, but as we become aware of these expenses, this is the bottom line to this section. As we become aware of these, you can make conscious decisions to help reduce it. It can free up money for savings.

It can free up money to get out of debt or other financial goals you have. But the big takeaway here for me, Craig, is look at what you're spending. A lot of people say, well, that sounds good, Ralph.

Or that sounds like a good idea, Craig, but you gotta measure what you're doing, track your expenses.

People, people think I'm crazy to say this, but have that intentional spending plan, have that budget plan, and then compare your results to what you plan. Like you said, you were surprised when you're, when your credit card bill was so much less. Well, that's fantastic.

And then you can make better decisions once you do that.

Craig
00:48:02

Right, Right. Great advice.

Ralph
00:48:05

Yeah. So like I said, if you're struggling to make ends meet, and I think the question was great, you feel like money's disappearing. Here's the thing.

You can take control of your finances. It's your decision. Like, I get so sick and tired when I hear people say, well, I've never been good at managing money. Well, I've never been.

That's your choice. You've. You've put yourself in that position. And that might seem like a really negative thing to say, but it's so true.

You have the ability to make that change. Listen, Craig, I'm gonna tell you something right now. About 20 years ago, I weighed 420 pounds. This is the truth.

Went to the doctor, he said, Ralph, you're gonna pop, dude. Like you are. My blood pressure was 200 over a hundred. Type 2 diabetes. And he looks at me, scar in the eyes, and he says, you have two young boys.

Do you want to them to be orphans? Right? And this goes along with these financial decisions, like financial physical fitness. It's the same thing. You have to make the choice.

Evaluate your subscriptions, reduce, dynamite. Avoid those impulse purchases. It's little things, but it helps build up that inertia. It helps build up that momentum.

So let me give you some action steps here. So I think these are really important. Evaluate new subscriptions for the next week, next two weeks, 30 days.

Look at every single thing you're spending money on for subscriptions and memberships and say to yourself, is this a need or is this a one? And maybe you decide, hey, this month we're going to do Netflix. Next month we're going to do this one. This one we're going to. But do that.

Look at your dining out expenses. Avoid those impulse purchases like, like Craig and his wife are doing. I think that one's huge. Be mindful of your household expenses.

Look at those store brands. You know, it can also reduce your transportation cost. You know, maybe you take a bike now. It depends on where you live.

I mean, like, I live out here in the country, man.

If somebody says to me, you're going to use public transportation, I mean, like, it could be a mule that goes past every once in a while, but it's not going to happen. But again, I'm going to encourage you if you want to go deeper in what we're talking about today. I do have a blog post. It's at askralphpodcast.com/blog.

So I encourage you to check that out.

But Craig, as we wrap things up today, I just want to say that if people feel like they're overwhelmed and they feel like they don't know where to start, one of the things you can do is you can actually book a call with me, go right to askralph.com and we'll do a consultation together. It doesn't matter where you are in the world. With Zoom, I can meet you wherever you are and I can help you get started.

I'll help you on that journey because it's not simple and it's not like I can say, here's your destination. It's a journey. It's a learning process. So that's one of the things I'm going to encourage you today.

And One more thing I'm going to bring to your attention. If you're interested in supporting the show now, you might say, ralph, what does that mean?

Well, we do this thing called Buy me a coffee, and it's a virtual coffee. No one's going to show up here in my office with coffee, because I don't even drink coffee, to be honest with you. But it's a way to support the show.

It's a way to help us reach more people. And that's really my mission. This isn't about profit for me. It's about what new networks can I go on? How can I reach more people?

With a message of hope and with a message of. There is a way to get past this. Craig, did you have anything else to add today before we call it a day?

Craig
00:51:12

Well, just that you do have control over your budget. You know, if you've got a piece of paper and you've got a pencil, you can create a budget and a plan for your spending.

And so even if all you do is knock one subscription out, you've done something. So this can be a really big task for a lot of us. You don't have to do it all at once. Just get started and you'll be better off.

Ralph
00:51:33

And that's critical. Start small. You know, I'll leave everybody with this. When I was going through that time in my life where I was so big, you know what I did, Craig?

I started by getting up off the couch and I walked across the room and I got out of breath doing that. Well, then the next, I did that for two or three days. And then I said, you know, I'm going to walk to the edge of the driveway.

I'm going to go to the mailbox. And I would walk to the end of the Mailbox. And it was tough, man. It was hard because, like, I was a big dude.

And then I would say, oh, you know what? I think I can go down the lane and I can go a little farther. I went around the cul de sac. Well, let me tell you in.

In about 12 months, Craig, guess what I did. I ran a 5K.

Craig
00:52:11

That's amazing.

Ralph
00:52:12

And again, it's not about me, but it was about. I set my mind to it. I put a goal out there. I said, look. And it was the slowest 5k anybody probably ever ran. I think it took me 45 minutes.

But it wasn't about the time for me. It was about finishing. It was about getting through it. And that's what Craig and I are saying. If you're listening, you're watching.

Today you can change your dynamic. It's up to you to make those decisions. So as I end today, I just want to say my passion is to help you achieve financial success.

I want to see you live out your dreams and I want to see you grow in your faith and I know working together. So continue to listen to the Daily Show. Continue to join us on Tuesdays at 1:00pm Bring your questions.

So as I end today, here's what I always say, Craig, as we go. And thanks again for joining me, Craig. It's been great having you on the show. But stay financially savvy out there and may God bless you abundantly.

Podcast Announcer
00:53:01

Thank you for joining us on the Ask Ralph show, and with a simple click to subscribe, we'll invite you back to our next episode. And remember, financial issues don't have to be complicated. Just Ask Ralph.

The information contained in this episode of Ask Ralph is based on on data available as of the date of its release.

Saggio Accounting Plus and Ask Ralph Media, Inc. Is under no obligation to update this content if changes occur.

Applying this information to your specific situation requires careful consideration of all facts and circumstances, and any information provided is not to be considered as financial, tax, or legal advice. Please consult your tax advisor or attorney before acting on any material covered.